Wednesday, November 20, 2019

Nevada Supreme Court Holds That Member is Entitled to Books and Records of LLC’s Subsidiary

Nevada Supreme Court Holds That Member is Entitled to Books and Records of LLC’s Subsidiary

      In a recent decision rendered by the Supreme Court of Nevada, it was held that a member was entitled to access to certain business records of a wholly-owned subsidiary of the LLC. Turnberry/South Strip, L.P. v. The Eighth Judicial District Court of the State of Nevada (Centra Park, LLC, Real Party in Interest), No. 77317, 2019 WL 5858938 (Nev. Nov. 7, 2019).

      Turnberry and Centra owned Turnberry/Centra Development, LLC (“TCD”) with Centra being a 30% owner and Turnberry the 70% owner. In addition, Turnberry was the managing member of TCD. In turn, Turnberry/Centra Office Quad, LLC (“Office Quad”), a Delaware LLC, was wholly-owned by TCD. Office Quad in turn had a wholly-owned subsidiary named Turnberry/Centra Office Sub, LLC (“Office Sub”).

       In 2013, Office Sub signed a confidential settlement agreement with Lehman Brothers and others regarding a loan. That settlement agreement resulted in the seizure of certain assets as collateral for those loans. Centra made a written request for copies of that agreement and related documents. TCD, controlled by Turnberry, refused to provide the requested documents. Ultimately the trial court would order the disclosure of the settlement agreement to Centra, whereupon this appeal followed.

      Applying Delaware law, the court began its analysis by noting the rule that LLC Agreements should be construed like other contracts, citing in support Kuroda v. SPJS Holdings, LLC, 971 A.2d 872, 880-81 (Del. Ch. 2009), then turned its attention to the provisions of the operating agreement of TCD addressing the right to access company books and records. In doing so, the court rejected the efforts by Turnberry to restrict Centra to the narrow “books of account,” highlighting as well that the operating agreement afforded the members access not only to the books of account, but also to “all correspondence, papers and other documents.” It also rejected the suggestion that those other documents were available only if they were related only to TCD itself and not any of its subsidiaries, characterizing any contrary result as being “absurd.”

      The court also rejected the suggestion that Centra should not be entitled to review the settlement agreement on the basis that it was not a party to it and it contains as well a confidentiality agreement.

No comments:

Post a Comment